Digital Video Express, LP to Discontinue Operations

DIVX Press Release for June 16, 1999

Digital Video Express, LP to Discontinue Operations

HERNDON, Va., June 16 /PRNewswire/ -- Digital Video Express, LP announced today that it will cease marketing of the Divx home video system and discontinue operations, but existing, registered customers will be able to view discs during a two-year phase-out period.

"Sales at participating Divx retailers reflect strong consumer interest in the Divx feature," said Richard L. Sharp, chairman and chief executive officer of Digital Video Express and of Circuit City Stores, Inc. (NYSE: CC, KMX), the majority partner in the Digital Video Express venture. "The majority of customers purchasing DVD players in Circuit City stores have selected players that include the Divx option. Unfortunately, we have been unable to obtain adequate support from studios and other retailers. Despite the significant consumer enthusiasm, we cannot create a viable business without support in these essential areas."

Digital Video Express will provide a $100 cash rebate to all consumers who purchased Divx-enhanced players prior to June 16, 1999. Rebate forms will be available at http://www.divx.com, participating retailers and by calling 1-888-639-DIVX. The rebate will ensure that no Divx customers have paid more for the Divx-featured player than they would have paid for the least expensive, comparable DVD player available at the time of their purchase. All Divx-featured DVD players are fully functional DVD players and will continue to operate as such. All Divx discs, including those previously purchased by consumers and those remaining in retailer inventories, can be viewed on registered players anytime between now and June 30, 2001. Subsequent viewings also will be available during that period. Discs can no longer be upgraded to unlimited viewing, known as Divx Silver. Customers who have converted discs to Divx Silver can continue viewing the discs until June 30, 2001, or can receive a full refund of the conversion price at their request. Divx expects to provide registered owners with written notification of the details related to the system phase-out. Effective today, Divx will no longer register new customers.

"We want to thank all our existing Divx customers and regret that this decision was necessary," Sharp said. "We hope to work closely with all Divx retailers and customers to ensure that the closure process is as simple as possible."

Circuit City Stores, Inc. is incurring an after-tax loss of $114.0 million related to the disposal of the Divx business. The loss includes provisions for commitments under licensing agreements with motion picture distributors, the write down of assets to net realizable value, lease termination cost, employee severance and benefit cost and other contractual commitments.

"I especially want to recognize all of our Divx Associates, who developed a terrific product that has performed flawlessly for our customers," said Sharp. "These individuals have put in countless hours from the early stages of the product's development through market introduction and the early operating phase. They have delivered exceptional customer service, and I cannot thank them enough for the talent, commitment and dedication they have given to this project."

Digital Video Express, LP is a partnership between Circuit City Stores, Inc. and a prominent Los Angeles entertainment law firm.

This release contains forward-looking statements, which are subject to risks and uncertainties, including, but not limited to, risks associated with the development of new business concepts and risks associated with year 2000 issues. Additional discussion of factors that could cause actual results to differ materially from management's projections, forecasts, estimates and expectations is contained in the SEC filings for Circuit City Stores, Inc.

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